March retail sales go from bad to awful

Hopes pinned on April rebound tied to Easter, war

By

JenniferWaters

Personal finance columnist

CHICAGO (CBS.MW) -- Retailers have one thing about March to be thankful for: It's over.

Last month's sales results weren't just weak, they were pathetic. An overall 0.2 decline in sales compared to the same period a year earlier hasn't been seen since March 1995, when sales fell 0.8 percent, according to Bank of Tokyo-Mitsubishi's tally of chain-store results.

Even the usual stalwarts -- Wal-Mart, Kohl's and Target -- missed their sales numbers, a reflection of just how tight consumers pulled in their purse strings.

There was plenty of blame to go around. The war in Iraq, the weather, the economy, joblessness, higher prices at the gas pump, tough year-over-year sales comparisons, and Easter's shift on the calendar into April this year all spoiled the March results, retailers said.

But no matter the culprit, there's no denying that consumers can no longer carry the weight of the U.S. economy on their backs.

"What this tells us is that the environment is exceedingly difficult for retailers. Consumers are extremely cautious in their purchasing," said Michael Niemira, BTM's retail analyst. He figures that the Easter shift could account for about 2 percentage points of March sales and that the "war/CNN effect" weakened sales further by 0.5 percentage point. As a result, he sees April's results coming in higher by as much as a 3.5 percent lift over the year-ago period.

Scott Hoyt, an economist for the economy.com, isn't so sure. While he sees benefits from pent-up demand and the holiday this month, he thinks shoppers need more.

"A broader improvement in the economy, including business spending and labor markets, is required before consumer spending accelerates significantly," Hoyt said.

Investors didn't appear to take much stock in that, bidding the sector higher by the trading session's end. See full story.

By most calculations, consumer staples were the biggest buys last month.

Though there were pockets of surprising strength among such names as Gap Inc., Costco Wholesale and Pacific Sunwear, most retailers reported that the month went from bad to worse, with the most anemic sales coming in the last two weeks of the month.

That would explain why so many retailers fell short of their own expectations as well as the average among analysts reporting their sales forecasts to Thomson First Call. "Retailers tend to be less talkative toward the end of the month than they are in the beginning," Niemira said. "They didn't tell us what was going on."

If there's a silver lining, it's that April undoubtedly will be better, thanks to the Easter holiday and the apparent ending of the conflict in Iraq.

"Overall, it's difficult to gauge (consumer sentiment) from March," said First Call's Ken Perkins. "This was expected that retailers would have weak results and lay the blame on the war and other things.

"We won't know the real impact of the economy until April's numbers are in and we combine them against last year," he said.

At First Call, which measures fewer retailers, the results came in at an anemic 0.1 percent gain.

At Bernard Sands, analyst Richard Hastings agreed, but thinks there are greater industry issues at hand. "Fashion retail is generally troubled with specific weakness in the moderate market," he said in a note to clients.

Like Niemira, Hoyt and Perkins, Hastings sees some recovery in April's same-store sales, but then they "resume their negative course through at least August."

Standout sellers

Though last month's total numbers edged lower, many retailers did clock some March gains.

Gap
GPS, -0.14%
saw its sales at stores open longer than a year climbed 9 percent, well ahead of the 5.4 percent projection as compiled by First Call, while Costco
COST, +0.38%
reported a robust 8 percent gain, higher than the First Call-derived 4.9 percent., and sales at Pacific Sunwear
PSUN
rose 9.5 percent, nearly double its 5.5 percent forecast.

However, Wal-Mart Stores
WMT, +0.50%
missed its numbers with same-store sales that were marginally higher by 0.7 percent, under the 1.5 percent expected by analysts. The world's biggest retailer tallied total sales of more than $23.17 billion for the month, up 7.8 percent from the prior year.

The pattern seen at Kohl's
KSS, -0.94%
was uncomfortably similar, with comparable-store results edging higher by 0.4 percent but coming in well below the 1.3 percent forecast at First Call.

The same was true for Target. Expected to fall 1.9 percent, comp-store sales at Target
TGT, +0.56%
tumbled 2.3 percent. That prompted the company to warn that first-quarter results were in trouble.

"Sales for the corporation continued to be somewhat below plan in March," said Bob Ulrich, chief executive of the parent of Target, Marshall Field's and Mervyn's stores. "In light of our actual sales performance in February and March, and our outlook for April, we are unlikely to fully achieve our profit plan in the first quarter."

He didn't come up with a forecast of what investors could expect.

As has been the case for many months, department store retailers took the hardest hits.

Comps at Federated
FD
were down 6.5 percent, Dillard's
DDS, -0.54%
plunged 12 percent and May
MAY, +6.25%
pulled back by 11.4 percent.

Saks
SKS, -7.13%
registered a drop of 3.8 percent in comp-store sales, but this wasn't as big as the 5.8 percent decline that analysts had expected.

Likewise, Nordstrom
JWN, -1.57%
came in a little better than forecast, with its comps down by 1.7 percent instead of the 2.8 percent drop that had been projected.

Aeropostale
ARO, -4.76%
posted a baby gain of 0.1 percent against a tough 35 percent jump in the year-ago period. But it was a lot better than the negative 4.3 percent at First Call and pleased Chief Executive Julian Geiger. Total sales surged 29.2 percent to $46.5 million for the month.

American Eagle Outfitters
AEOS
dived 9.3 percent with the deepest lunge from the Bluenotes/Thrifty stores in Canada. Overall, the casual wear retailer said comp-store sales toppled 9.3 percent, with American Eagle stores off 8.5 percent and Bluenotes/Thrifty down 20.8 percent. Total sales rose 1.7 percent to $119.3 million.

AnnTaylor
ANN, -0.48%
went deeper than expected to 8.8 percent on a same-store basis. The Ann Taylor stores fell 9.2 percent and Ann Taylor Loft was down 6.4 percent - both against easy year-ago comparisons. Total sales slipped 0.2 percent to $138.2 million.

Chico's
CHS, +3.35%
was a huge winner again, blowing away a 7.6 percent prediction with a 12.4 percent gain in same-store sales. President Scott Edmonds said his stores didn't suffer from the so-called "CNN effect" that nearly every other retailer complained about. He also backed first-quarter earnings of 27 cents or 28 cents a share.

Claire's
CLE, -14.29%
did better on the other side, rising 3 percent rather than the 2 percent expected.

Costco
COST, +0.38%
was one of those that performed so well, it made the sector look better. Same-store sales rolled in at 8 percent, higher than the 4.9 percent expected. Total sales vaulted 12 percent to $3.88 billion.

Dollar General
DG, +0.24%
sales were stronger than forecast, up 4.2 percent instead of the 3.5 percent forecast.

Federated
FD
Chief executive Terry Lundgren reiterated first-quarter profit projection range of 14 cents to 19 cents a share despite a 6.5 percent drop in sales. That was just a tad under the minus-6.7 percent at First Call.

Gap
GPS, -0.14%
did the surprised thing again, clocking same-store sales gains of 9 percent that were much higher than 5.3 percent average projection from analysts.

Hot Topic
HOTT
went cold with same-store sales that were off 3.1 percent rather than the negative-0.1 percent expected. The company said things were going well until the last week of the month when sales fell into the minus column.

J.C. Penney
JCP, +2.48%
warned that earnings would be lower than expected, now falling to a range of 18 cents to 23 cents a share because of deteriorating sales. Comparable-store sales at Penney stores were down 5.5 percent against the minus-3 percent expected.

Kohl's
KSS, -0.94%
proved disappointing with a 0.4 percent increase that missed the 1.3 expected. Total sales, however, catapulted 21.7 percent to $913.5 million, thanks mostly to the 28 new stores that opened last month in the greater Los Angeles area.

Limited
LTD, +1.12%
came in a tad narrower than expected, off 4 percent on a same-store basis company wide. At First Call, analysts were expecting minus-4.6 percent.

May
MAY, +6.25%
was well below par at minus-11.3 percent instead of negative 8.8 percent.

Michael's
MIK, +1.26%
came in flat, not too far off from a 0.6 percent forecast.

Sears Roebuck
S, -0.31%
pulled off a nice surprise with some-store results that dropped 3.1 percent instead of the 9.4 percent analysts were expecting. Total March revenues tallied $2.39 billion, down 2.3 percent.

Talbots
TLB
waved a warning flag after posting better-than-expected comp-store sales of 0.8 percent instead of a decline of 8.9 percent. Chief Executive Arnold Zetcher said the lift helped offset February's weak results, but he wanted to be cautious about April. He sees earnings for the quarter in a range of 48 cents to 51 cents a share, well below last year's profit of 57 cents a share.

TJX
TJX, +0.68%
fell 2 percent instead of 3 percent, which is what First Call had.

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